If you have being any attention to the Crypto world you’ve seen a lot about the ‘Ethereum Merge‘. So what does that really mean? Ethereum is being merged with what?
To understand the Merge you first need to understand ‘Proof of Work‘ and ‘Proof of Stake‘. Proof of work and Proof of Stake are both algorithms or consensus mechanisms to keep the blockchain secure so users can add new cryptocurrency transactions. These two concepts are essential to cryptocurrency transactions and security. They are key components of blockchain technology and how it works. Both, in different ways, help ensure users are honest with transactions, through incentivizing good actors and making it extremely difficult and expensive for bad actors to commit fraud on the blockchain network.
What is proof of work?
The proof of work consensus algorithm uses complex problems for miners to solve using high-powered computers. The problems are solved using trial and error. The first miner to complete the puzzle or cryptographic equation gets the authority to add new blocks to the blockchain for transactions. When the block is authenticated by a miner, the digital currency is then added to the blockchain. The miner also receives compensation with coins.
What is proof of stake?
Miners pledge an investment in digital currency before validating transactions with proof of stake. To validate blocks, miners need to put up stake with coins of their own. Miners also show how long they have been validating transactions. The choice for who validates each transaction is random using a weighted algorithm, which is weighted based on the amount of stake and the validation experience.
For more information on the differences between Proof of Work and Proof of Stake take a look this excellent article https://www.techtarget.com/whatis/feature/Proof-of-work-vs-proof-of-stake-Whats-the-difference
- The upgrade from the original proof-of-work mechanism to proof-of-stake was called The Merge.
- The Merge refers to the original Ethereum Mainnet merging with a separate proof-of-stake blockchain called the Beacon Chain, now existing as one chain.
- The Merge reduced Ethereum’s energy consumption by ~99.95%.
- The Merge was executed on September 15, 2022. This completed Ethereum’s transition to proof-of-stake consensus, officially deprecating proof-of-work.
For more detailed information on the Ethereum Merge refer to the official Ethereum The Merge site.
Crypto investors have gone back and forth on the impact of the merge to the price of the ETH cryptocurrency.
Here’s one article on the potential downside of the merge…
And here’s a counter argument on the potential upside of the merge…